Tuesday, October 22, 2013

Jordan cuts rate 25 bps on FX growth, contained inflation

Jordan's central bank cut its benchmark rediscount rate by 25 basis points to 4.50 percent, it's second rate reduction this year, citing "recent positive economic and monetary developments, particularly the robust growth in foreign exchange reserves and the contained inflationary pressures."
The Central Bank of Jordan (CBJ), which cut its rate by 25 basis points in August for a total cut of 50 points this year, also lowered the rate on its other policy rates by 25 points. The rate on the overnight repurchase agreement was cut to 4.25 percent, the rate on one week or more repurchase agreements to 3.75 percent and the rate on the overnight window deposit facility to 3.50 percent.
"It is expected that this decision will reduce borrowing cost for both the private and public sectors, which will positively contribute to stimulating aggregate demand," the CBJ said, adding the lower rediscount rate would be applied to its credit that has been extended to targeted sectors as part of its initiative to provide medium and long-term advances.
Jordan's headline inflation rate rose to 5.45 percent in September from 5.04 percent in August and the central bank said in May it expected inflation of 5 percent this year, up from 4.5 percent in 2012 but down from an earlier estimate of 6 percent due to lower food prices. Data from the CBJ shows foreign currency reserves of $11.748.4 billion at the end of August.
Although Jordan's economy has suffered from political unrest in the Middle East, including the influx of Syrian refugees and lower remittances from Jordanian workers abroad, the country's economy has been recovering on higher government spending, stronger exports and domestic consumption.
The economy expanded by an annual 3.1 percent in the second quarter, up from 2.6 percent in the first quarter, and the CBJ's governor said in May that he expected growth of around 3.5 percent this year, up from 2.8 percent in 2012. The International Monetary Fund projects 3.3 percent growth.
In addition to the cut in its policy rates, the central bank said the rate on medium and long-term advances to investors would be cut to 2.5 percent from 2.75 percent.